Ford Motor Credit Earns $441 Million in 2Q

DEARBORN, Mich. (July 21, 2006) -- Ford Motor Credit announced it earned a net income of $441 million in the second quarter of 2006, which is down $299 million from $740 million earned in the same period of the prior year. Meanwhile, Ford Motor Co. reported a net loss of $123 million for the quarter, as compared to a net-income gain of $946 million in the same time frame of last year.

Ford Motor Credit executives said the decrease in earnings can be attributed to higher borrowing costs, the effect of lower average receivable levels, lower credit loss reserve reductions and higher depreciation expense.

"Our sustained focus on strong business fundamentals has generated high quality assets and solid results," said Mike Bannister, chairman and chief executive officer of Ford Credit. "We continue to support Ford Motor Co. with profits and dividends."

As of June 30, Ford Credit posted an on-balance sheet had net receivables of $136 billion, compared with $132 billion on Dec. 31, 2005. Managed receivables came in at $151 billion, compared with $150 billion on Dec. 31, 2005.

Discussing Ford Motor Co.'s results, Bill Ford, chairman and chief executive officer, said, "We've seen an improvement in North America results in the second quarter, but the external factors we face aren't going to get any easier. Mark Fields (executive vice president and president of the Americas) and his team have been working on plans to accelerate their efforts. Within the next 60 days, we'll be in a position to discuss the additional actions we will be taking."

Looking specifically at North America's results, operations reported a pre-tax loss of $797 million, as compared with a pre-tax loss of $907 million a year ago. Executives said the improvement can be explained by cost reductions in most areas of the business, which was partially offset by a shift from trucks to passenger cars, higher incentives and adverse foreign currency exchange. Sales were $19.2 billion, down from $19.9 billion for the same period a year ago.

Talking with analysts, Ford said he remains confident that the automaker will reduce capacity by 15 percent and achieve profitability in North American operations by 2008.

"We remain committed to this goal; we have seen improvement," Ford said, according to a recent report. "I am encouraged by what has been going on behind the scenes. But the external factors I have outlined are not going to get any easier, which means we need to go farther and faster."

From the analysts' point of view, Robert Barry, of Goldman Sachs, said, "North America remained the primary culprit contributing to the weakness. Pressures from volume and pricing (product) mix remain severe, and we do not see much improvement anytime soon."